Operators cautious on the eve of budget

Like the man who has eaten too well but not too wisely, the stock markets are busy digesting their last year's gains. They have lost a few points in the bargain and might shed a few more in the next few days before the budget.

Operators are always cautious on the eve of the budget but they seem to be more cautious than usual this time. The word seems to have gone out from the North Block that although the economy is not doing too badly, there are quite a few screws loose here and there which may have to be tightened before the full benefit of the bumper harvest can be garnered for the corporate sector.

There is no doubt that investors are flush with money and so are apparently the institutions who generally tend to hold back on the eve of the budget lest they should be caught on the wrong foot. For the past two or three weeks there has been a spate of new issues and nearly all of them have been fully subscribed and quite a few oversubscribed two to three times.

Investors apparently prefer to put their money on new companies rather than on old ones, and one can't really blame them considering the high prices of most scrips. Money is also going into gold and silver - bullion prices are once again bullish - and almost certainly into real estate.

The preferences may change after the budget: money into gold and silver may help speculators but nobody else and the Government must be wondering how best to direct the flow into the corporate sector.

Something like Rs 1,500 crore are expected to be raised through the capital market this year and this can't be done without some incentives. The market is awaiting a signal from New Delhi before it can really make up its mind; and that is why the present lull.

Two things worry the market right now: hike in coal prices which is almost certain to trigger off price hikes elsewhere; and the coming crunch in foreign exchange following the Government's decision to forgo the last instalment of the IMF loan.

The trade deficit being what it is, the country cannot do without loans or aid, and if there are constraints on both, imports will almost certainly suffer. The budget may offer more incentives to non-residents in which case share prices should look up.

After all, where would DCM and Escorts be today without Swraj Paul? Other Pauls must be waiting in the wings, watching the unfolding of the non-resident drama and its final denouement.

By the law of averages, shares which did unduly well last year may do no more than mark time this year, and vice-versa. By this token, tea plantation shares which nearly doubled in price last year should receive a second look. Companies engaged in electrical machinery manufacture fared rather badly last year - though performance varied from company to company and Siemens put up a good show - and should do better in 1984.

Most agro-based companies did remarkably well - Oswal Agro was a dark horse when the year started but ran away with the cup - and there is no reason why the performance should not be repeated. Cement has had its day and may not do half as well this year as it did in 1983. Shipping shares are recovering rapidly and should be watched.

The MMTC has just signed an agreement with Japan for the export of 8 million tonnes of iron ore, against 6 million tonnes last year. With the expected recovery in the economies of most industrial countries, shipping should receive a boost, though its troubles may not be over yet.

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